{"id":16085,"date":"2025-09-16T17:48:00","date_gmt":"2025-09-16T15:48:00","guid":{"rendered":"https:\/\/wsj-crypto.com\/?p=16085"},"modified":"2025-09-16T17:48:00","modified_gmt":"2025-09-16T15:48:00","slug":"crypto-markets-anticipate-fed-rate-cuts-amid-trumps-disruption-of-central-bank-dynamics","status":"publish","type":"post","link":"https:\/\/wsj-crypto.com\/index.php\/2025\/09\/16\/crypto-markets-anticipate-fed-rate-cuts-amid-trumps-disruption-of-central-bank-dynamics\/","title":{"rendered":"“Crypto Markets Anticipate Fed Rate Cuts Amid Trump\u2019s Disruption of Central Bank Dynamics”"},"content":{"rendered":"

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As the US Federal Reserve gets ready to modify interest rates on Wednesday, a wider transformation at the central bank may have significant consequences for crypto markets.<\/p>\n

The Fed is anticipated to reduce interest rates tomorrow, in a move that conventionally indicates a surge in crypto markets: Diminished returns on assets like bonds make higher-risk assets such as crypto more appealing.<\/p>\n

The projected rate reductions arise amid a political clash and a recent appointment to the Federal Reserve. US President Donald Trump\u2019s administration has accused Fed governor Lisa Cook of mortgage fraud while it seeks her dismissal<\/a>. Simultaneously, the Senate has ratified White House economic adviser Stephen Miran<\/a> to the board of governors.<\/p>\n

The allegations against Cook and the intention to nominate someone linked to the administration might signify a less independent Federal Reserve, which holds a crucial role in determining crypto policy.<\/p>\n

Bitcoin price surged in 2021-2022 amid low US interest rates. Source: <\/em>Trading Economics<\/em><\/a><\/figcaption><\/figure>\n

Implications of a Political Federal Reserve on Crypto Policy<\/h2>\n

The Trump administration aims to oust Cook \u2014 a Biden-era designate \u2014 as it seeks to exert more influence over the Federal Reserve. On Aug. 25, the White House X page shared a letter in which Trump dismissed Cook, alleging she made fraudulent statements<\/a> on one or more mortgage contracts.<\/p>\n

Cook refuted the claims and declined to resign. Her legal representatives asserted<\/a> that the accusations were politically motivated and that the White House is \u201cscrambling to construct new rationalizations for its overreach.\u201d Cook herself declared that it is \u201cunprecedented and unlawful.\u201d<\/p>\n

On Monday, the appeals court in Washington prevented<\/a> the White House from removing Cook from her role at the Federal Reserve. This will enable her to retain her position while the matter is ongoing.<\/p>\n

\"Federal
Trump attempted to remove Cook on Aug. 25 \u201ceffective immediately.\u201d Source: <\/em>Rapid Response 47<\/em><\/a><\/figcaption><\/figure>\n

This morning, Miran, an economist and chair of the Council of Economic Advisors, who has made some favorable comments regarding crypto previously, was confirmed by the Senate.<\/p>\n

His role is temporary \u2014 the term concludes in January 2026 \u2014 but Miran has refused<\/a> to commit to resigning as a White House adviser if his term extends beyond Jan. 31.<\/p>\n

This has raised concerns among Democratic legislators that the Fed and its monetary policy agenda will become more aligned with Trump\u2019s political objectives.<\/p>\n

Related: <\/strong><\/em>Trump renews efforts to remove Fed\u2019s Cook ahead of anticipated rate cut<\/strong><\/em><\/a><\/p>\n

Aaron Brogan, founder of the crypto-focused law firm Brogan Law, informed Cointelegraph, \u201cThe Fed possesses considerable authority over banks, and ultimately, banks act as quasi-regulators of the crypto sector by determining who can and cannot obtain financial services.\u201d<\/p>\n

\u201cThat influence is unlikely to diminish with a less autonomous Fed, but the policy could shift. I would wager it would be more fickle and susceptible to public sentiment.\u201d<\/p><\/blockquote>\n

A political Fed represents relatively uncharted waters. When asked what a less independent Fed signifies for US monetary policy, Brogan remarked, \u201cNobody knows.\u201d<\/p>\n

\u201cThere\u2019s an assumption that a dependent Fed would implement more liberal, excessive monetary policy simply because it is more responsive to public sentiment, which can be volatile. But since we\u2019ve yet to witness it, it remains pure conjecture. In this administration, at least, Trump would likely lower rates.\u201d<\/p><\/blockquote>\n

Crypto Market Prepares for Federal Reserve Rate Reduction<\/h2>\n

As legislators in Washington grapple with the fate of the central bank, crypto markets are gearing up for the Fed\u2019s meeting tomorrow, where a rate cut is expected.<\/p>\n

Kevin Rusher, founder of the real-world asset (RWA) borrowing and lending ecosystem RAAC, stated to Cointelegraph that \u201cmarkets are on edge.\u201d<\/p>\n

\u201cResuming the cutting cycle begins to release the $7.2 trillion parked in money market funds, alongside the trillions tied up in outstanding mortgage debt.\u201d<\/p><\/blockquote>\n

He forecasted that liquidity would flow into alternative yield-generating investments like those in decentralized finance (DeFi) and RWAs.<\/p>\n

Alice Liu, research lead at CoinMarketCap, informed Cointelegraph that \u201chigh-beta layer 1s\u201d such as Ether (ETH<\/a>) and Solana (SOL<\/a>) are particularly influenced by Fed interest rate adjustments.<\/p>\n

\u201cThese behave like growth tech \u2014 more sensitive to liquidity and risk appetite than BTC. Especially as interest rate reductions could likely trigger additional capital injected into risk-on assets, investors may look to allocate extra capital into ETH\u2019s \u2018digital oil\u2019 narrative or SOL\u2019s expansion growth,\u201d she mentioned.<\/p>\n

She indicated that DeFi tokens become \u201crelatively more appealing\u201d when interest rates decline, enhancing tokens associated with lending\/DEX activity.\u201d Bitcoin remains \u201cthe premier crypto\u201d and is less sensitive to interest rate fluctuations but can still react \u201caround significant policy surprises and liquidity shifts.\u201d<\/p>\n

The Kobeissi Letter noted<\/a>, \u201cWhen the Fed cuts rates within 2% of all-time highs, the S&P 500 typically responds positively.\u201d While immediate-term outcomes were mixed, \u201cin 20 of the last 20 times this has occurred, the S&P 500 has ended higher one year later.\u201d<\/p>\n

Bitcoin and gold rally following interest rate cuts. Source: <\/em>Kobeissi Letter<\/em><\/a><\/figcaption><\/figure>\n

They anticipate a similar outcome this time as well. \u201cThere will be more short-term volatility, but long-term asset holders will benefit.\u201d<\/p>\n

\u201cGold and Bitcoin have already sensed this. The consistent upward price movements we\u2019ve observed in these asset classes are pricing in what\u2019s forthcoming. Gold and Bitcoin know that lower rates amidst an already HOT backdrop will elevate asset prices. It\u2019s an optimal time to possess long-term assets.\u201d<\/p>\n

The political struggle for the Fed remains unresolved, yet irrespective of who is in charge, low interest rates are a favorable sign for traders.<\/p>\n

Magazine: <\/strong><\/em>Meet the Ethereum and Polkadot co-founder who wasn\u2019t featured in Time Magazine<\/strong><\/em><\/a><\/p>\n